Bankruptcy Articles

The attorneys at The Debt Doctors have assembled this reading list to help you make informed decisions about your financial future.

Article: The New Bankruptcy Law

By Matthew Herron, J.D.
The Debt Doctors

On October 17, 2005, the bankruptcy laws will change. Most people think it will be the end of Chapter 7 bankruptcy and the ability to wipe out large amounts of credit card balances, medical bills, expired leases, repossesions, foreclosures and judgements. This is not true, individual debtors will still have the right to file a Chapter 7 or Chapter 13 bankruptcy under the new laws. However, the focus of this legislation will be to force more people into a Chapter 13 bankruptcy where debtors will pay off a percentage of their debts over a five year period, instead of wiping out their debts in a Chapter 7.

What does this mean to a person thinking about filing for bankruptcy? Basically, it means that:

1. Filing a bankruptcy will be more expensive. The new laws have increased filing fees and the responsibilities placed on attorneys. Therefore, filing a bankruptcy will be more expensive under the new laws.

2. Filing a bankruptcy will be more time consuming for Debtors. The new laws will require debtors to attend credit counseling classes and in some cases appear at multiple hearings in order to obtain a bankruptcy discharge.

3. Filing a Chapter 7 bankruptcy will be very difficult for individuals who’s income exceeds the median family income level (median family income for a family of 4 in PA is $62,901). Furthermore, the new laws will only allow debtors to claim the applicable monthly expense amounts specified under the National and Local Standards issued by the IRS. So if your income exceeds the median family income level or if you have a high house or car payment you may be forced into a Chapter 13 payment plan that will not work unless you make changes in your lifestyle according to these guidelines.

After October 17, 2005, if you are having problems with your bills you will need an experienced bankruptcy attorney with the resources to explain these changes and prescribe a course of action that will lead you to your life after debt. Contact the Debt Doctors, a firm created to handle the complexities of the new bankruptcy laws.

Article: Your credit card payment just doubled. What should you do?

By Matthew Herron, J.D.
Managing Attorney
The Debt Doctors

Paying off costly credit cards has never been easy. And it is about to get harder. The Office of the Comptroller of Currency has begun pressuring credit card companies to raise monthly minimum payments from 2% to 4%, doubling your minimum monthly payment. Most credit card companies are falling in line. So, what do you do if you are struggling to pay your minimum now?

When you are having trouble paying your bills your first call should be to an attorney. Unlike mortgage brokers or credit counselors attorneys are bound by the ethics code of The Supreme Court of the State. Attorneys are not salesman trying to sell you a product. They will present you with your available options and discuss the positives and negatives of each. Bankruptcy is not an option for everyone, but it is the answer for more people than you may think.

Mortgage Brokers are encouraging people to use equity in their home to pay credit card debts. Does it make sense to incur more debt to get out of debt? Would you risk your home to pay off a credit card? What many people fail to realize is that a home equity loan is a mortgage secured by your house. If you are unemployed, sick, or unable to make payments on a home equity loan for any reason you can lose your house to a foreclosure sale. Credit Cards are unsecured debts, which if you miss a payment in most cases cannot do anything more than call and harass you. Is it worth the risk?

Credit counseling agencies do not do anything that you can’t do for yourself. Credit counselors are expensive and in many cases can damage your credit. Credit counseling relies on the credit card companies to voluntarily reduce balances or interest rates. In many cases, the credit card companies refuse to do so. Furthermore, credit counseling agencies may fail to tell you they are not paying your bills until they settle your debts with the creditors. In the meantime, your credit is getting worse. Before you use a credit counselor call some of your creditors and try to settle these debts on your own and save the fees.

Why is bankruptcy a better option than a Home Equity Loan?

a.  In a bankruptcy you can protect up to $36,900 of equity in your  home and either eliminate or reduce your credit card debts dramatically.

b.  In most cases the reduction of your credit card debts can improve or mitigate the negative affects of bankruptcy.

c.  The same banks that want you to use your equity to payoff credit card debts will be lining up to give you credit cards after your bankruptcy, because they know you can’t file again for 8 years.


Why is bankruptcy a better option than Credit Counseling?

a.  In most cases, you pay less in fees for a bankruptcy than you would pay for credit counseling.

b.  When you file bankruptcy you do not have to rely on the “good will” of the credit card companies to reduce or eliminate your debts. The credit card companies are required to abide by the bankruptcy courts ruling.

c.  If you are eligible for a Chapter 7 you can get rid of your unsecured debts in approximately 6 months.

d.  Once you file for bankruptcy your pre-petition creditors are prohibited from reporting to the credit reporting agencies.


Explore all of your available options when your minimum credit card payments increase. Calling an attorney is a good start. At the Debt Doctors our main goal is to give you honest advice based on your financial situation and provide you with enough information to allow you to make an informed decision whether bankruptcy is the right decision for you.

Article: Life After Bankruptcy

By Jim Clarke
President
Equity Lending Group, Inc.

There is a common misconception that once you file bankruptcy you will never be able to borrow money again.  Most people think they will never be able to obtain mortgage financing, car financing or even credit cards.   However, the credit industry has become very forgiving.  In terms of mortgage financing, you can literally obtain a new mortgage just one day after the discharge of a bankruptcy.  Obviously you are not eligible for the same rates and terms as you may have had prior to the bankruptcy, but you can be approved for a mortgage.  Some things to consider when you are looking to get new credit after a bankruptcy:

1. Try to re-establish new credit.  A secured credit card is a good way to do this.  Open a secured card even if it is for $500.  You make a deposit with a bank or credit card company for the amount of the credit limit.  Only charge what you can afford to pay off monthly.  Treat it like an interest free loan.  Make sure to pay your balance off monthly. If you do not pay, the institution takes the balance from your deposit balance and this has a negative effect.

2. Finance a used car.  Auto financing is usually the easiest loan to get.  Although you will pay a higher rate, this is a very good way to re-establish your credit on an installment debt, with regular monthly payments.  Do not over spend on the car.  Buy a modest car where you know you can make the payments on time each month without any problem.

3. The longer the time since your discharge of the bankruptcy the better.  One year after discharge is the standard now to be considered for sub prime credit (although you can technically get a new mortgage after only 1 day from discharge).  After a year the rates and terms will be better.  After two years you can actually qualify for conforming financing.  As time passes your risk to the lender improves and better rates and terms will become available.  Continue to try to re-establish new credit, do not carry a balance, and make sure to pay off what you charge.

The old idea that once you file bankruptcy you are ruined for ten years just simply is not true.  As mentioned earlier there are a huge number of lenders competing for business.  This has opened the doors for people who may have fallen on bad times where bankruptcy was the only answer.

Article: Bankruptcy, Debt Consolidation or Credit Counseling?

By Matthew Herron, J.D.
Bankruptcy may be a better alternative than credit counseling or debt consolidation to get rid of unsecured debt.

1.  The fees for a bankruptcy are less than the costs associated with credit counseling or debt consolidation

2. In a bankruptcy, the federal bankruptcy court orders your creditors to accept your best effort to pay your unsecured debts. In many cases you are required to pay nothing. In credit counseling or debt consolidation, you have to rely on the goodwill of your creditors to get out of debt – despite what you may hear, there are no guarantees!

3. Bankruptcy attorneys are required to go through years of schooling and are held to high ethical standards. Credit Counselors and Debt Consolidators are unregulated – you are essentially rolling the dice for your financial well being.

4. Credit counseling or debt consolidation can destroy credit. Credit counselors or debt consolidation organizations are not required to pay your bills on time and your creditors can still report negative history to the credit reporting agencies. In a bankruptcy, your pre-petition creditors are prohibited from taking any collection action including reporting to the credit reporting agencies and when you receive your bankruptcy discharge you get a “fresh start” free of old debts.

5. In a bankruptcy you pay no interest on unsecured debts. Credit counseling and debt consolidation cannot make the same promise.

6. Credit counseling and debt consolidation is very expensive and it can take years to be debt free. If you qualify for a chapter 7 bankruptcy, in most cases you’ll be debt free in six months at a minimal cost.

Get Professional Advice. Save time and money. Prepare yourself for life after debt…

Contact an attorney at the Debt Doctors today by calling 1-877-Debt Dox.

Article: Would You Risk Your Home To Pay Off A Credit Card?

Don’t Risk Your Home to Pay Off Your Debt! In most cases a Bankruptcy is a better alternative to a home equity loan to get rid of unsecured debt.

1.  In a bankruptcy, you can protect $18,450 per person in equity in your home and eliminate your unsecured debt.

2. Unlike bankruptcy, if you get sick, lose your job or can’t make your equity loan payment for any reason you risk losing your home through foreclosure.

3. In some cases, filing a bankruptcy can make you more attractive to potential lenders, because receiving a bankruptcy discharge will improve your debt to income ratio, instead of damaging your credit by incurring more debt.

4. In most cases, the fees for a bankruptcy are less than your closing costs to obtain a home equity loan.

5. In a bankruptcy you pay no interest on unsecured debts. No mortgage lender can offer you a similar arrangement.

Article: Common Mistakes People Make Before Consulting A Bankruptcy Attorney

By Matthew Herron, J.D.
The Debt Doctors

Here are is a list of some of the common mistakes people make prior to filing for bankruptcy.  Understand all of your options, contact an attorney at The Debt Doctors and prepare your self for life after debt:

1.  Getting a home equity loan to pay off high interest credit card debt -- thereby increasing overall debt and putting your home at risk of foreclosure.

2. Continuing to pay credit card balances when there is a loss of income -- but stop paying on secured debts like your mortgage.

3. Borrowing from retirement savings to pay off credit card debt.  Don't risk your future savings -- bankruptcy may be able to keep your nest egg safe.

4. Going to credit counseling.  In a small percentage of cases they may be able to help, but for most it is just postponing real financial recovery.

5. Accepting legal advice from a bill collector.  They do not have your best interests in mind when pursuing a debt.

6. Getting flustered by collection calls.  They can be annoying, but will stop immediately when you file for bankruptcy protection.

7. Getting flustered when your account is referred to an attorney for collection.  Another tactic of the credit card companies.  Be sure to contact an attorney at The Debt Doctors who will help guide you on a path to financial recovery.

8. Failing to contact a bankruptcy attorney when behind on mortgage more than two months.  Don't put your home -- or your equity -- at risk!

9. Paying for a vehicle that has been repossesed or totalled.

10. Failing to file tax returns just because you cannot afford to pay.  Always submit your tax documents, this will allow you to work with the IRS for any outstanding debt.

11. Pledging your residence as collateral for business debt.  Don't jeopardize your home for your business.  There are no guarantees of success and there are alternatives available to you.

Contact an attorney at The Debt Doctors today for a free, confidential and no obligation consultation by clicking here.